* Dollar dips from 1-month high vs currency basket, euro
* Focus on whether Fed will keep pledge to keep rates low
* U.S. service sector grew in October, but below forecast
(Updates prices, adds analysts' quotes and background)
By Wanfeng Zhou
NEW YORK, Nov 4 (Reuters) - The dollar slipped against most
major currencies on Wednesday as a rally in stocks and
commodities eroded the greenback's safe-haven appeal and
investors awaited a policy decision from the Federal Reserve.
The decision, expected at about 2:15 p.m. (1915 GMT), is
the key news for the day. The focus will be on whether the
policy-setting Federal Open Market Committee will uphold its
pledge to keep the benchmark fed funds rate low for "an
extended period" even as the economy shows signs of improving.
See []
Given the recent unwinding of gains in higher-yielding
currencies such as the Australian dollar, analysts said any
indication that U.S. interest rates will stay low would prompt
investors to take on riskier investments. If that happens, that
may push the dollar lower, analysts said.
"I'm not looking for the Fed to make any substantial
changes," said Dan Cook, senior market analyst at IG Markets in
Chicago. "We had really positive (gross domestic product)
growth, but they also realize the employment situation.
"We're going to stay where we are at for an extended period
on interest rates," he added.
In midday trading, the euro <EUR=> was up 0.8 percent at
$1.4837 after hitting a session high of $1.4845, according to
Reuters data. On Tuesday, the euro-zone single currency hit a
one-month low around $1.4623.
The ICE Futures U.S. dollar index <.DXY>, which measures
the dollar against a basket of six other major currencies, fell
0.7 percent for the day to 75.876. That was a retreat from
Tuesday's one-month intraday high of 76.817.
Michael Woolfolk, senior currency strategist at BNY Mellon
in New York, said a surprise from the Fed with the "extended
period" language would prove the most important event of the
month, but added that "it's an outside risk, with perhaps only
a 20 percent probability.
"All the Fed speakers have indicated since the last meeting
that the time is not yet right" to start normalizing rates, he
said.
ECB, US JOBS AWAITED
The dollar hit a session low versus the euro after a report
showing the U.S. service sector grew in October for the second
consecutive month helped U.S. stocks extend gains.
[]
"Investors are probably looking at the increase in new
orders, which is a leading indicator for economic activity,"
said Jacob Oubina, currency strategist at Forex.com in
Bedminster, New Jersey. "Also, export orders increased, which
suggests that dollar weakness is helping boost exports. That's
a welcome sign for the economy."
But overall, Oubina said, the report was mixed and "the
most worrisome" part is the drop in the employment index, which
"doesn't bode well for Friday's nonfarm payrolls report."
U.S. private employers shed 203,000 jobs in October, fewer
than a revised 227,000 jobs lost in September. [].
The U.S. government will release its monthly nonfarm payrolls
data on Friday.
Commodity currencies such as the Australian and New Zealand
dollars gained as gold prices <XAU=> hit a record high near
$1,100 an ounce and oil rose above $80 a barrel <CLc1>.
The Australian dollar rose 0.6 percent to US$0.9085 <AUD=>,
erasing an earlier drop on the back of an unexpected slide in
Australian September retail sales. The New Zealand dollar was
up 0.5 percent at US$0.7240 <NZD=>.
Sterling <GBP=> rallied 0.9 percent to $1.6570 even as wary
investors await a UK policy decision on Thursday, which could
see the Bank of England increasing asset purchases. []
The European Central Bank will also make an interest-rate
announcement on Thursday.
(Additional reporting by Gertrude Chavez-Dreyfuss and Steven
C. Johnson; Editing by Jan Paschal)
